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U.S. Consumer Spending Down Sharply in Early January

by Dennis Jacobe, Chief Economist

Self-reported spending declines across income groups

PRINCETON, NJ -- Overall self-reported daily consumer spending in stores, restaurants, gas stations, and online averaged $55 per day in the week ending Jan. 9 -- down as expected from the $75 average for the month of December, but also well below the $68 average for the same week in 2010.

Throughout 2010, consumer spending remained relatively close to that of 2009 -- the "new normal" trend. Spending surged in December of each year and then fell back in January as expected, given seasonal spending trends; Gallup's spending data are not seasonally adjusted. Weather may be partly responsible for the sharper drop in early January 2011 -- Gallup has found that it can affect weekly spending. Regardless, there are no signs that an improvement in consumer spending is taking place in early January 2011.

Upper-Income Spending Surged in December, Fell Back in Early January

Spending among upper-income Americans (those making $90,000 or more annually) averaged $102 per day in the week ending Jan. 9 -- down from $127 during the same week in 2010.

The early January drop follows a December surge -- upper-income spending was $144 in December 2010, up from $132 in the same month in 2009. Upper-income Americans appear to have the ability to spend more freely when they choose, but don't always seem to want to do so.

Lower- and Middle-Income Spending Also Declined in Early January

Lower- and middle-income Americans' self-reported spending averaged $45 per day during the week ending Jan 9. Spending by these Americans making less than $90,000 a year had increased to $63 in December, on par with December 2009, but last week fell behind the $54 average spending of the first week of January 2010. It may be that lower- and middle-income consumers pulled back on their early January spending to compensate for their relative spending surge during December.

As consumers continue to deleverage -- by not only paying down their debts, but also using less new credit -- it may be that the "new normal" spending patterns of 2009-2010 will continue unabated in 2011. Lower- and middle-income consumers, who remain focused on using cash, may spend more on holidays and for special events, but then feel the need to pull back on spending shortly thereafter to compensate. Upper-income consumers, who have more disposable income to spend, might splurge at certain points during the year, but hold back on their spending more generally, as they did in 2009 and 2010.

Further, unemployment remains near double digits, and the broader underemployment figure stretches to include nearly one in five Americans in the workforce. And, although the government's economic data continue to show little inflation, oil prices exceeding $90 a barrel have pushed gas prices much higher than a year ago. Surging commodity and import prices are doing the same to food prices. A lack of job growth combined with higher food and gas prices may convince many Americans -- particularly middle- and lower-income consumers -- to hold back on their spending once again, as they have over the past couple of years.

Whether the decline in spending during early January is an aberration driven by the weather and the aftermath of a late holiday spending surge or, instead, a return to the "new normal" is not clear. What is clear is that the direction of consumer spending during the weeks ahead will be key to the performance of the U.S. economy in early 2011.

Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:

Survey Methods

Results are based on telephone interviews conducted as part of Gallup Daily tracking during the week ending Jan. 9, 2011, with a random sample of 3,509 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling. For results based on the total weekly sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.

Monthly results are based on telephone interviews conducted as part of Gallup Daily tracking with a random sample of approximately 13,000 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling. For results based on the total monthly sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±1 percentage point..

Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each daily sample includes a minimum quota of 200 cell phone respondents and 800 landline respondents, with additional minimum quotas among landline respondents for gender within region. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.

Samples are weighted by gender, age, race, Hispanic ethnicity, education, region, adults in the household, cell phone-only status, cell phone-mostly status, and phone lines. Demographic weighting targets are based on the March 2010 Current Population Survey figures for the aged 18 and older non-institutionalized population living in U.S. telephone households. All reported margins of sampling error include the computed design effects for weighting and sample design.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit www.gallup.com.

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